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Understanding Different Types of Real Estate Agents

December 18, 2017

There are essentially two types of real estate agents – Transactional and Relational

A Transactional agent leverages everything so that their only activity is lead generation and working ON their business, not IN it. Most real estate TEAMS fall into this category. They focus on Quantity.

A Relational agent still leverages, but only the administrative work. They spend more of their time with clients and actively working deals and spend very little time lead generating because they have more than enough business from repeat and referral business. They focus on Quality.

Lets talk about the Transactional agents, more specifically the teams. They have been rising in popularity since 2004 when a very prominent real estate figure wrote a book about how real estate agents could become millionaires. Most of the book is about how agents can leverage themselves to make the most money by forming a team. In fact, the book is broken down into stages with a very detailed roadmap from thinking about a million to earning and netting a million. It is considered to be the blueprint for “success” for many top teams. There is very little focus on customer service, advocacy, expertise, etc… Just look at some of these quotes from actual agents in the forward of the book:

“It’s the most thought-out real estate business model ever. The concept is not pie in the sky. It is not even a concept because it is being done every day. Think big! Lead generate! Add systems! Hire three great people. You’re a millionaire! Many thanks to ♦♦♦♦ and ♦♦♦♦ for sharing their vision.” – G♦♦♦ A♦♦♦♦, Austin, TX

“The concepts taught by ♦♦♦♦ ♦♦♦♦♦♦ can and will make you rich if followed.” – J♦♦ B♦♦♦, Asheville, NC

“If any agent currently in real estate wants to make more money, net more money, work less and succeed at the highest level possible in their professional and personal lives, ♦♦♦ was designed for them. Our business, our net worth, and our lives have all been greatly enhanced because of this incredible education.” – J♦♦ R♦♦♦♦♦ Plano, TX

Typically, these teams start with a great agent who ends up with more business than they can handle. They take on agents underneath them so they can focus on “money making activities.” That’s when they become the “Rainmaker” and stop handling any of the day to day business. Many of them start “coaching” other agents. They no longer actually sell real estate themselves. They essentially become a brokerage, without officially being one. This confuses a lot of consumers!

“The Rainmaker”

Many quote the production of the entire team when going up against a single agent. It seems impressive at a quick glance but if the XYZ team sold $60,000,000 last year with 10 licensed agents, is that actually better than the single agent who sold $15,000,000? Those teams also frequently tout the experience of the Rainmaker when he’s not actually involved in the transactions. Some even add up all the years of experience! Do you really think that a team who is all about delegation has all agents putting their heads together on each deal? Probably not. Deceptive? You decide.

So who are these agents who would want to work under a Rainmaker? Remember that the whole purpose of the team concept is for the person at the top to make more money. You can bet they are taking a big cut of that agent’s commissions. Who would take that job? Not someone good enough to do it on their own, that’s for sure. Most team members are agents who are new to the business, new to the area, part time, or just lack the confidence and/or skill to do it on their own.

A favorite tagline of these teams is “There’s no way a single agent can deliver the same service as a team!” Look at the example above with the single agent selling $15,000,000 a year. That agent is a Relational agent, focusing on quality. They leverage the administrative work, focusing on the selling, contracts, marketing details, continuing education/mastery, and networking, averaging $1.25 million a month. They spend their time focused on their clients, which generates referrals for future business. They don’t have to spend time lead generating or managing a business.

A team in my market uses an infographic in their marketing that says, “Selling a house entails”…..”There is no way to do this at a high level alone” Here is a list of what’s between those statements.

I can see how this would be convincing, however, lets break these down:

RED items – business building activities and activities that are specific to HAVING A TEAM that have nothing to do with selling homes.

BLUE items – administrative items that are delegated by most top producing single Relational agents to an assistant.

GREEN items – these are done by 3rd party vendors

Highlighted items – Of the 45 tasks listed, these 24 are the duties that actually have to do with selling a home and are done by the agent. These are all very important tasks that should ONLY be done by the skilled agent. But as you can see, it is absolutely possible to do these things at a “high level alone” when you take out all of the “fluff.”

Last but not least on the subject of teams. Teams like to talk about how they are more efficient because they delegate. They treat the home selling process like an

assembly line. They have different people who work with buyers, someone else who handles sellers, another who calls for the feedback, someone else who takes the phone calls, and sometimes another person who negotiates the contracts, etc… The problem with this is that these are not car parts. When you make a car, the engine doesn’t have to know anything about the brakes in order to perform it’s function. Specialization and the assembly line concept works on car parts – not so much in real estate. Here are a few examples:

A listing agent who reads all buyer feedback is going to have a better understanding of what buyers are looking for, which will in turn help them price more accurately.

An agent who only works with buyers is not going to understand how sellers think, and will be much less effective negotiating against them.

Conversely, an agent who only works with sellers is not going to understand how buyers think and will be less effective negotiating against them.

A person who takes all incoming calls but doesn’t sell isn’t probably the best FIRST point of contact for someone calling on a listing.

Keep in mind that individual agents can be also be Transactional agents. And, smaller teams (most commonly just a partnerships) can also be Relational. Now that you understand the difference, you can decide what type of agent you will work best with and who you think is more likely to get the best results for you.

Here are some great questions to ask any agent you are considering to list your home:

How long have you been a licensed real estate agent AND working full time, selling a minimum of 1 home a month?

Be sure to ask like this. Understand that newer agents try to get around this question by saying how long they have been “in real estate.” I know an agent who has been licensed and practicing for only 2 years but says she’s been “in the business for 20 years” because she has been married to an agent and did home staging. Also, beware of people who say thigs like, “I have been in sales, management, design, etc… for 20 years, just now transitioning to real estate.” Selling software is not selling real estate. Real estate is not a commodity, there are emotions involved, selling to people is different than business to business, there are very important legalities, etc…

In Texas, license numbers are issued in order. I was licensed in Texas in 2006 and my license number is 566438. Licenses issued in 2016 start with 665, so the lower the number the longer they have been licensed.

2. How long have you been licensed and working full time in this particular area?

Just because someone has been active in another state or city doesn’t mean they are as proficient in a new area. They won’t have the contacts/relationships or the understanding of the mindset of local buyers and sellers.

3. Does the phone number on the sign, ads, etc… connect directly to you?

You want a buyer prospect to connect directly to the person selling the home!

4. Will you be negotiating the contracts?

And if so, since so much real estate happens on the weekends, is your cell phone published in the ads, signs, etc… ? If not, this is a red flag.

5. How many homes have YOU sold in my area, more specifically, my neighborhood?

Someone who has sold 150 homes is going to have a much stronger grasp on the market than someone who has sold only a few. They will be able to make quicker decisions because their market knowledge will be innate. Then drill down – how many have they sold in the past 2 years. Be sure this is their production, not their entire team’s. Zillow is a great place to check this also, as it shows the agent’s number of sales all time and you can look at a map to see where they were and if they represented buyer or seller. While you’re on Zillow, look at their reviews. If it’s a team, look specifically for the agent’s reviews. Most teams have very high turnover so a review not specific to the agent you’re working with is meaningless.